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Question Of The Week: Can A Church Renew A Pastor’s Contract Without An Agreement on Salary?

Editor’s Note:  Each week, non-profit expert Don Kramer will answer a question about non-profit law or governance.

QUESTION:  My church’s by-laws state that the compensation of ministers must be approved by a vote of the congregation at a congregational meeting. The Board of Trustees is considering renewing a contract for a minister whose contract is up next year. The minister is asking them to promise to renew before any negotiation. If the Board agrees, does that expose the Board to any liability if the negotiations fall apart and they decide not to renew because they can’t agree on his salary?  —From the Website.  

ANSWER:  Probably not, but you wouldn’t want to have to litigate it to prove it.

As a general rule, a contract is not binding if there is no agreement on its material terms, and compensation for an employee would normally be considered a material term. In addition, the minister is probably aware that salary has to be approved by the congregation and that the board doesn’t have authority to agree unilaterally. If you ultimately failed to agree with the minister on salary after having “promised” to retain him, you would probably win a lawsuit. But why put yourself in position to face such a suit?

Your board can tell him it wants to retain him after his current arrangement expires, subject to an agreement on the compensation and other terms. It is in his interest as much as yours to know whether the salary will be satisfactory to him. You have a year to work it out and get the approval of the congregation. But it doesn’t make sense for either of you to make a commitment without first agreeing on the critical terms.

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Donald Kramer

Donald W. Kramer is chair of the Nonprofit Law Group at the Philadelphia law firm of Montgomery, McCracken, Walker & Rhoads, LLP. He has more than 40 years of experience dealing with the concerns of nonprofit organizations, not only as a lawyer, but also as a teacher, writer, publisher, and board member. He is editor and publisher of Don Kramer's Nonprofit Issues®, a national electronic newsletter of "Nonprofit Law You Need to Know", which he started at Montgomery, McCracken in 1989. He writes and lectures frequently on nonprofit legal issues, and has taught courses on nonprofit organization law at the University of Pennsylvania Law School, the School of Social Policy and Practice at the University of Pennsylvania, and Eastern University. A graduate of Princeton University, he earned an LL.B. degree from Harvard Law School.